What is a "good" amount of debt?

Paying for College
1

Hey everyone…I’ll be very frank with you all. I’m aware that the “best” amount of debt is no debt at all. However, if one was to take out loans to pay for college, what might a safe amount be?

As the time draws nearer to finally pick a college, I find myself stuck between two due to money. One is an in-state public school where I could graduate without debt. It is super tiny, in the middle of nowhere (literally), has limited majors (but I could definitely make what they have work), and great academics. It definitely seems from online reviews that students sometimes struggle to find things to do there for entertainment, and so oftentimes turn to drinking, which I am strongly against. Long story short, its pros are that the science programs are strong and I could graduate without debt.

School number 2 is an out of state public school located in a top college town. They have a large amount of majors that really interest me and are quite specified, not as general as school #1’s. I got into the Honor’s College here, which means I would be with the most talented students of my class and living together in the same dorms, which are pretty new and VERY nice. The surrounding area is lively and it is a good sized campus (I’ve found I tend to prefer medium-large schools).
Unfortunately, even with the scholarship I got (not yet counting any outside ones I may win) I’d have to take out roughly $10,000 a year in loans. So, overall the pros here are the academics/majors, dorms, location, honor’s college, and size/atmosphere of the school.

If I attend the first school, I would probably graduate with a biochemistry degree, and at the second it would be a molecular genetics degree. I suppose a job after college would vary as far as a starting salary goes, but I’m fully aware that I cannot expect to walk out and make a great amount of money each year.

This has turned into almost more of a “which school should I pick” post, and I’m sorry about that, because I know I can’t ask anyone to make that decision for me. But, anyways, is $40,000 of debt unmanageable? Which choice has the potential to pay off better in the long run? Any sort of comments/opinions are welcome guys…thank you for taking the time to read!

2

You can’t borrow $10,000 each year without a co-signer, so #2 is out unless your parents are willing to commit to the debt beyond the student loan limits ($5,500 freshman year, $6,500 sophomore year, $7,500 junior year, and $7,500 senior year).

The job market is tight for students who graduate in any biological science. My advice is to choose the cheap option.

3

The average college student borrows about $30,000 over the course of four years.

Bear in mind that the cost of college tends to rise each year which means that you/your parents wouldn’t necessarily be borrowing $10,000 even each year; in addition, the unsubsidized portion of your federal student loans (assuming you have them) will start capitalizing interest immediately unless you keep paying it, which could make the debt burden swell above $40,000. (Does that $10,000 include the federal student loans or will that be separate debt on top of the loans?)

Is it unmanageable? No. But I would hesitate to take on that amount of money since it could interfere with your life after college in terms of being able to move around for jobs, work for a lower salary in an entry-level position, etc. In addition, unless you personally have decent income and assets right now you will need a cosigner for the loan which means that your parents would be on the hook.

The second college you describe definitely sounds like a good option, but it might be worth some serious thought just because of the risks. If possible, try to see how much of that excess cost you can winnow down. Have you had a chance yet to comb through the college’s cost of attendance. In my opinion, these costs can sometimes be inflated; you can’t really change tuition, but maybe you can shave some bucks off of the room and board by taking a cheaper meal plan. (Room costs may not be changeable if you are in an honors dorm or something, but check that out). Sometimes the transportation amounts are inflated – if your college isn’t too far from home, you can drive instead of fly and not take as many trips home. Try to isolate the direct costs – the moneys that you owe the college – from the costs that you can manage.

4

Go here and figure out how long it would take you to pay off that $40k, and how much of a bite it would take out of your earnings each month:

http://www.finaid.org/calculators/loanpayments.phtml

5

I would say within the student loan limit. Obviously, the amount may depend on your intended major and predicted career.

6

There is a guy with a local radio show where I live who says you should not graduate with more debt than you can earn in our first year of employment.

I was at a meeting the other day and in attendance was a gentlemen currently attending law school (don’t recall where). He has a huge amount of student debt (didnt share if it was undergrad and law combined), but is well aware it will take decades to pay off and will affect his ability to buy a house, a new car if he wants to finance it, etc. Very sad.